The government decided to manage the supply of rare earth elements closely by product category to prevent disruptions in the domestic industry. After the United States imposed a tariff of 54% targeting China, China responded by controlling the export of rare earths, prompting the South Korean government to prepare countermeasures.
Rare earths are essential mineral raw materials used in advanced technology sectors such as smartphones, electric vehicles, semiconductors, and superconductors. The domestic industry significantly depends on China for its supply of rare earths and is expected to be negatively affected.
On the afternoon of the 7th, the Ministry of Trade, Industry and Energy held a 'supply chain inspection meeting' in response to China’s controls on rare earth exports. The meeting, chaired by Noh Seong-hwa, director of supply chain policy, was attended by representatives from related ministries, including the Ministry of Strategy and Finance, the Ministry of Foreign Affairs, related corporations, associations, the supply chain center for materials and parts, the Korea Mine Rehabilitation and Resource Corporation, and the Rare Metals Center.
On the 4th, China designated a total of seven items for export controls: dysprosium, yttrium, samarium, lutetium, scandium, terphenyl, and gadolinium, and decided to add export approval procedures for these rare earths. Like graphite and gallium, which are already controlled items, they can be imported after receiving export approval from China’s Ministry of Commerce (with a legal deadline of 45 days).
According to the Ministry of Trade, Industry and Energy, the industry is currently securing response capabilities through public stockpiles, private inventories, and alternatives. It has been found that public stockpiles of dysprosium, primarily used as an additive in permanent magnets for electric vehicles, and yttrium, used for phosphors and alloy additives, exceed six months.
In the case of terphenyl for permanent magnets, the amount of added dysprosium can be increased to respond, and gadolinium for phosphors can be partially replaced with other substances. Samarium, an additive for permanent magnets, and scandium, an alloy additive, are also known to be imported from countries other than China.
The Ministry of Trade, Industry and Energy announced that they will respond closely to prevent any disruptions in the supply and demand of rare earths, which are utilized in various fields and highly dependent on China. According to the International Energy Agency (IEA), China accounts for about 60% of the world's rare earth production, and its rare earth processing and refining industry holds a 90% share of the global market.
The ministry plans to further monitor the impacts of export controls by item in the future and closely watch supply and demand trends. In particular, they plan to communicate with China’s Ministry of Commerce through a Sino-Korean supply chain hotline and export control dialogue to ensure that export approvals are not delayed or denied.
Additionally, they will strengthen cooperation with rare earth holding countries, including Australia, while expanding support for technology development (R&D) for reducing, replacing, and recycling rare earth usage.
Noh Seong-hwa emphasized, "We will closely manage export control items to prevent disruptions in the supply and demand of rare earths and will provide detailed guidance and support on export approval procedures to corporations involved in rare earth imports and demand."
Meanwhile, China had previously imposed export bans on rare earth processing technologies in December 2023. At that time, the ban was not on rare earths themselves, but on the control of four technologies related to the refining, processing, and utilization of rare earths, so the impact on the domestic industry was not significant.
This export control measure pertains directly to rare earth materials, raising concerns about its impact on the domestic industry. It is reported that when export approval requests come from other countries, China will verify the user and purpose before deciding on the export approval.